Transforming Beyond 'Factory Asia' Key to Keeping Economies Strong

NEW DELHI, INDIA – Developing Asia must invest in skills, technologies, and the private sector to move beyond low-cost manufacturing and ensure economic growth remains strong, delegates at the Governors’ Seminar at the 46th Annual Meeting of the Board of Governors of the Asian Development Bank (ADB) heard today.

“’Factory Asia’ itself is clearly evolving,” ADB President Takehiko Nakao said. “Huge investments must be made in education and skills training that are appropriate for the needs of the future. For any of this evolution to proceed, the right infrastructure must be in place.”

Exporting manufactured goods has transformed many Asian economies over the past few decades, helping lift millions out of poverty. However, that growth model needs to evolve given changing global patterns of growth, demographics, and technology, according to Beyond Factory Asia: Fuelling Growth in a Changing World, which was presented at the Governors’ Seminar, the flagship seminar of the Annual Meeting.

Slow growth in the US, Europe, and Japan together with a growing Asian middle class means demand is shifting away from developed markets to emerging economies. Expanding markets in other regions of the world may also present a new opportunity for Asia.

Meanwhile, production in Asia is becoming more expensive as wages and commodity prices tick up and as the labor pool shrinks, eroding Asia’s cost advantage. Complex supply chains and volatile foreign exchange rates make management of manufacturing across multiple countries difficult and increasingly risky.

While low-cost manufacturing will remain a key part of Asia’s economies going forward, its contribution will decline and governments need to be ready now to help their economies continue to transform.  The region needs to boost domestic demand and help firms target other emerging markets in Asia and beyond. Greater regional cooperation will open up trade across borders and keep protectionism in check.

Support will be needed to help the private sector move up the value chain and to develop the financial markets needed for companies to raise funds and manage risks. Meanwhile, countries need to help their people learn the skills that companies need to produce more sophisticated goods and to invest in the research that will encourage development and adoption of new technologies.

Other panelists at the seminar included Japanese Finance Minister Taro Aso; Anne Sipilainen, ADB Governor for Finland; Armida Alisjahbana, the Indonesian State Minister for National Development Planning; Raghuram Rajan, the chief economic advisor to the Government of India; and Harvard Business School Professor Tarun Khanna.

India's economic growth to remain robust: UN report

New Delhi: India's economic growth is expected to remain robust in 2012 and 2013, despite likely headwind of double-dip recessions in Europe and the US. This has been highlighted in the World Economic Situation and Prospects 2012, the United Nations' annual economic report released today. 

Indian economy is expected to grow by between 7.7 per cent and 7.9 per cent this year, the report said. South Asia's economies are expected to grow by 6.7 per cent this year and 6.9 per cent next year, accelerating slightly from 6.5 per cent last year.

Robust domestic demand will sustain this increase (in South Asia), but the economic slowdown in India, where growth declined from 9 per cent in 2010 to about 7.6 per cent last year, brings down the regional average, the report said. South Asia comprises India, Pakistan, Nepal, Iran, Bangladesh and Sri Lanka.

On Inflation

Among the major developing countries, growth in India and China is expected to remain robust. Brazil and México are expected to suffer a more visible economic slowdown.

The UN report expects inflation in most developing countries to decelerate this year, along with an anticipated moderation in global commodity prices and lower global growth.

Fiscal Deficit

On fiscal deficit, the report said that the Indian Government is unlikely to achieve its fiscal deficit target of 4.7 per cent of the gross domestic product for 2011-12 as lower growth has brought down tax revenues and disinvestment in state-owned entities has been put on hold.

On the global economic prospects for 2012 and 2013, the report noted that the world economy is on the brink of another major downturn and anaemic growth is expected during 2012 and 2013. Source: Hindu Business Line

Emergence of India as a key global economy by 2050

A recent Asian Development Bank (ADB) report states that India will be one of the seven economies that will lead the rise of Asia. The report—Asia 2050: Realizing the Asian Century—states that India will be amongst these economies that will account for 45 per cent of global GDP.

India will be one of the seven economies that will lead the rise of Asia. These seven economies alone will account for 45 percent of global GDP, according to Asia 2050: Realizing the Asian Century, a report by Asian Development Bank (ADB).

Significantly, reinforcing the economic credentials, India's foreign exchange reserves reached an all-time high of US$ 321 billion, up by US$ 1.6 billion, for the week ended September 2, 2011.

Growth of India after 1980s was one of the catalysts that spurred the re-emergence of Asia and the country falls into the fast growing, converging economies category of Asia.
In recent times, Indian firms have led the rest of the world in developing the cheapest cars (Tata's Nano is priced at US$ 2,500), cheapest mobile phones (at US$ 20), cheapest phone call rates, cheapest cataract surgery (at US$ 30), and the cheapest laptop (at US$ 35).

Read the report ASIA 2050: Realizing the Asian Century